24 PERSPECTIVES ON BUSINESS AND ECONOMICS | VOL 43 | 2025 Simplicity in design Effective utility-customer relationships depend on simple, stable pricing that benefits both parties and fosters trust and efficiency. Objectives 4–6 encompass principles of stability and simplicity. For consumers, rates should be simple and easy to understand. For the utility, rates should be simple to administer to reduce administrative costs. Stable and predictable rates allow consumers to appropriately budget, while utilities can accurately forecast revenues to plan for investments and resource allocation. Considering that rates in Taiwan have not changed since 1994, rates have been simple and stable (Shurui, 2021). An additional tradeoff prevents rate structures from being perfectly designed. A complex rate structure with frequent updates and sophisticated mathematics might perfectly achieve objectives 1–3 on efficiency and fairness but fail to be simple and stable. This tradeoff requires utilities to balance complexity for cost-efficient rate design with keeping the rate structure easy to understand and predict. Utilities with convulated rate structures can burden consumers unnecessarily, contradicting their fundamental responsibility to serve the public. On the other hand, overly simplified rate structures can lead to inefficient use of resources, a factor that has contributed to Taiwan’s ongoing water crisis. Recommendations To better align pricing with the costs of service and conservation policy objectives, Taiwan should adopt customer classification and raise block prices for large users. These changes would promote adoption of alternative resources, particularly among industrial users, while ensuring fairness and stability for all stakeholders. This section elaborates on these recommendations and provides the reasoning behind their proposed implementation to address Taiwan’s water crisis effectively. Utilities often segment customers into classes (usually residential, commercial, and industrial), each with a unique pricing structure. This approach allows utilities to more accurately match delivery costs and policy goals to each class. Cost matching becomes more precise because demand profiles for domestic and industrial consumers typically differ. Domestic consumers generally have more variance in demand on a daily and seasonal basis, whereas industrial facilities tend to have more uniform usage. Additionally, industrial consumers are often served by large, treated water transmission systems, whereas domestic consumers use smaller ones, each with distinct operating cost structures (AWWA, 2016). Customer classification also enables policy goals to be more accurately targeted, with rate makers focusing on specific groups. If a utility wants to incentivize conservation within a single class of customers without impacting others, it is easier to do with classifications rather than with a single rate structure like Taiwan’s current system. As previously noted, the Reclaimed Water Resources Development Act emphasizes the industrial sector for development of reclamation technology. Of the act’s target capacity for reclamation facilities, 38% is to come from the industrial sector, compared to only 4% from the domestic sector (Cheng et al., 2023). Given that the Taiwanese government has targeted the industrial sector through this policy, incorporating industry classifications into its rate design would significantly advance this goal. This article’s recommended rate design is poised to advance policy goals for alternative water resource development, particularly by incentivizing industrial users to adopt reclamation technologies. Industrial users currently pursue reclaimed water resources for three key reasons: compliance with existing policy mandates, preparation for anticipated future mandates, and the desire for a more reliable and stable supply. These incentives have led some industrial users, namely in the liquid crystal display and semiconductor industries, to develop reclaimed water resources. Companies such as Innolux, TSMC, and AU Optronics have developed on-site treatment units for reclaiming water from their manufacturing processes (Cheng et al., 2023; Crook, 2023, April 20). Of the three reasons, reliability and stability have been particularly important drivers. Acquiring tap or recycled water from municipal facilities may not be as reliable in future droughts because political pressure may force the Taiwanese government to prioritize domestic, agriculture, and energy consumers (Steven Crook, personal communication, November 20, 2024). Companies with very high use face substantial exposure to this instability risk, creating greater motivation to develop their own reclaimed water technology. Beyond stability and policy-related reasons, Cheng and colleagues (2023) also argue that a decrease in the price disparity between municipal reclaimed water and tap water would be an additional motivation for industrial users to adopt alternative resources. Excluding construction costs, water from municipal reclamation facilities costs from NT$18.8–30.9 per cubic meter. The high cost of operating such facilities forces them to seek cus-
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